This story first appeared in DNA Money edition on Wednesday, November 16, 2011.
Multi-use integrated property developer, Phoenix Mills (PML), has set out to cut down the clutter. As part of its business restructuring exercise, the BSE-listed company is looking to acquire controlling stakes in its subsidiaries before merging them. The idea is simple: to keep the number of arms to a minimum and avoid complications in financial reporting.
On Monday, PML said it has acquired a controlling stake in Market City Management Pvt (MANCO) from Entertainment World Developers (EWDPL) and Big Apple Real Estate Development Pvt Pradumna Kanodia, director-finance, PML, said the company will be looking to merge some of the other wholly owned subsidiaries (WoS) with MANCO.
“It is a small company with a 40% holding and has been acquired at book value of Rs 6 lakh. The company was originally designed to take care of our property management contracts (PMCs) and other activities. We realised eventually that such an entity was not required anymore and hence, we have taken 100% ownership.
Going forward, we feel reporting in consolidation will be a Herculean task with too many subsidiaries. Reducing the number of companies that we need to manage will make accounting and reporting a lot simpler,” he said. Earlier in September this year, the company had acquired Mugwort Developers Pvt Ltd. The said acquisition, according to Kanodia, was also part of the broader restructuring initiative.
In another development, PML is targeting a March 2012 breakeven for its Phoenix Market City Pune property launched earlier in June this year. With around 22% occupancy at the time of launch, the property is currently enjoying occupancy of 60-65% with over 200 operational stores giving the developer rentals of over Rs 5 crore.
“The initial response for Pune property has been very encouraging. We are targeting a profit after tax (PAT) level breakeven by this fiscal end. The current rental realisation is almost covering my interest requirement for the month. We are hopeful the occupancies will reach 90% by March 2012 and averaging at close to Rs 65 per square foot (PSF) in terms of rental value. This rental realisation will not only cover our interest but will also take care of the repayments thereafter,” he said.
PML’s flagship luxury hotel Shangri-La with the High Street Phoenix development at Lower Parel in Mumbai which was to open by now has got further delayed owing to approval related issues. While the developer (PML) has completed most of the execution work, the management now envisages 3-4 month delay in the opening. “Given the current approval related issues faced by most developers in the city of Mumbai, we now feel a March-April opening of the hotel will be more realistic as against December which was communicated earlier. It will basically start with soft launch and the entire asset should be completely operational in a couple of months thereafter,” he said.
After numerous delays since 2009, the Shangri-La Hotel, Mumbai was envisaged to finally open by the year end. Its asset owning company, Phoenix Mills Ltd (PML), had earlier planned to soft-launch the property with 50% inventory sometime in Q2 FY2010-11. However, PML ran into problems with one of its contractors as a result of which work on the project suffered until new contractor was appointed. Work on the project finally resumed towards the end of 2010 and PML management was optimistic about handling over the hotel to the management company (Shangri-La Hotel and Resorts) for a soft-launch by December 2011. However, with the new set of delays, the property is now expected to start receiving guests by March-April 2012.
Featuring 410 guestrooms and 23 serviced apartments when fully operational, Shangri-La Hotel, Mumbai will soft launch with 250 guestrooms. The serviced apartment units will however be launched in the third and final phase which is likely to happen by the end of 2012-13.
Most of the hotel projects being developed by PML sit under a separate special purpose vehicles (SPVs). The Shangri-La Hotel, Mumbai is under Pallazzio Hotel and Leisure Ltd (a subsidiary of Phoenix Mills Ltd). The overall cost of the hotel project is envisaged to be over Rs 700 crore, of which Pallazzio Hotels has already pumped in Rs 483 crore in equity while the balance is debt.
In an earlier interaction, Shishir Shrivastava, group CEO and joint managing director, PML, had said, “We have invested close to Rs 625 crore as of now and additional investment of Rs 175 to Rs 200 crore will be made to fully complete this property. The equity part has already gone in and we are now drawing down the debt component as and when required based on the extent of work completed.”
Multi-use integrated property developer, Phoenix Mills (PML), has set out to cut down the clutter. As part of its business restructuring exercise, the BSE-listed company is looking to acquire controlling stakes in its subsidiaries before merging them. The idea is simple: to keep the number of arms to a minimum and avoid complications in financial reporting.
On Monday, PML said it has acquired a controlling stake in Market City Management Pvt (MANCO) from Entertainment World Developers (EWDPL) and Big Apple Real Estate Development Pvt Pradumna Kanodia, director-finance, PML, said the company will be looking to merge some of the other wholly owned subsidiaries (WoS) with MANCO.
“It is a small company with a 40% holding and has been acquired at book value of Rs 6 lakh. The company was originally designed to take care of our property management contracts (PMCs) and other activities. We realised eventually that such an entity was not required anymore and hence, we have taken 100% ownership.
Going forward, we feel reporting in consolidation will be a Herculean task with too many subsidiaries. Reducing the number of companies that we need to manage will make accounting and reporting a lot simpler,” he said. Earlier in September this year, the company had acquired Mugwort Developers Pvt Ltd. The said acquisition, according to Kanodia, was also part of the broader restructuring initiative.
In another development, PML is targeting a March 2012 breakeven for its Phoenix Market City Pune property launched earlier in June this year. With around 22% occupancy at the time of launch, the property is currently enjoying occupancy of 60-65% with over 200 operational stores giving the developer rentals of over Rs 5 crore.
“The initial response for Pune property has been very encouraging. We are targeting a profit after tax (PAT) level breakeven by this fiscal end. The current rental realisation is almost covering my interest requirement for the month. We are hopeful the occupancies will reach 90% by March 2012 and averaging at close to Rs 65 per square foot (PSF) in terms of rental value. This rental realisation will not only cover our interest but will also take care of the repayments thereafter,” he said.
PML’s flagship luxury hotel Shangri-La with the High Street Phoenix development at Lower Parel in Mumbai which was to open by now has got further delayed owing to approval related issues. While the developer (PML) has completed most of the execution work, the management now envisages 3-4 month delay in the opening. “Given the current approval related issues faced by most developers in the city of Mumbai, we now feel a March-April opening of the hotel will be more realistic as against December which was communicated earlier. It will basically start with soft launch and the entire asset should be completely operational in a couple of months thereafter,” he said.
After numerous delays since 2009, the Shangri-La Hotel, Mumbai was envisaged to finally open by the year end. Its asset owning company, Phoenix Mills Ltd (PML), had earlier planned to soft-launch the property with 50% inventory sometime in Q2 FY2010-11. However, PML ran into problems with one of its contractors as a result of which work on the project suffered until new contractor was appointed. Work on the project finally resumed towards the end of 2010 and PML management was optimistic about handling over the hotel to the management company (Shangri-La Hotel and Resorts) for a soft-launch by December 2011. However, with the new set of delays, the property is now expected to start receiving guests by March-April 2012.
Featuring 410 guestrooms and 23 serviced apartments when fully operational, Shangri-La Hotel, Mumbai will soft launch with 250 guestrooms. The serviced apartment units will however be launched in the third and final phase which is likely to happen by the end of 2012-13.
Most of the hotel projects being developed by PML sit under a separate special purpose vehicles (SPVs). The Shangri-La Hotel, Mumbai is under Pallazzio Hotel and Leisure Ltd (a subsidiary of Phoenix Mills Ltd). The overall cost of the hotel project is envisaged to be over Rs 700 crore, of which Pallazzio Hotels has already pumped in Rs 483 crore in equity while the balance is debt.
In an earlier interaction, Shishir Shrivastava, group CEO and joint managing director, PML, had said, “We have invested close to Rs 625 crore as of now and additional investment of Rs 175 to Rs 200 crore will be made to fully complete this property. The equity part has already gone in and we are now drawing down the debt component as and when required based on the extent of work completed.”
No comments:
Post a Comment